33. Compute how much a business is worth if it is expected to generate cash flows...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
33. Compute how much a business is worth if it is expected to generate cash flows to its owners of $0 for the next three years, $42,800 in three years, $60,000 in four years, then $85,000 per year for the subsequent U years (i.e., $85,000 per year after four years in the future and then continuing for the next U years until 4+U years into the future), and finally generates cash inflows to its owners of $100,000 per year thereafter forever (i.e., $100,000 forever after 4+U years), assuming that businesses with similar relevant risk have expected returns of 15%, 33. Compute how much a business is worth if it is expected to generate cash flows to its owners of $0 for the next three years, $42,800 in three years, $60,000 in four years, then $85,000 per year for the subsequent U years (i.e., $85,000 per year after four years in the future and then continuing for the next U years until 4+U years into the future), and finally generates cash inflows to its owners of $100,000 per year thereafter forever (i.e., $100,000 forever after 4+U years), assuming that businesses with similar relevant risk have expected returns of 15%,
Expert Answer:
Answer rating: 100% (QA)
The process of figuring out how much money a business is worth is called its valuation Valuation is an important part of any business deal because it ... View the full answer
Related Book For
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow
Posted Date:
Students also viewed these finance questions
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
The Coca-Cola Company and Home Depot have been very profitable companies, typically trading at high multiples of earnings, book values, and sales. This case asks you to value the two companies using...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
The ResultSet object can be created by either executing the or method, which means that the ResultSet instance cannot be created or used without executing a query operation first. a. executeQuery(),...
-
Gohan Companys output for the current period yields a $12,000 favorable overhead volume variance and a $21,500 unfavorable overhead controllable variance. Standard overhead charged to production for...
-
In Canada, education and healthcare systems are controlled by the governments and the market controls most of the businesses. Which term describes Canada's economy?
-
Explain in simple terms why an aircraft climbs.
-
Record each of the following transactions using T accounts, assuming the perpetual inventory system is used: Aug. 2 Purchased merchandise on credit from Vera Company, invoice dated August 1, terms...
-
1.How have we manipulated electricity to get us to this point of target interactions? 2.Describe a bremsstrahlung target interaction. 3.Describe a characteristic target interaction. 4.The majority of...
-
Using Rhodes Corporation's financial statements (shown below), answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2012? b. What are the amounts of net...
-
Explain three arguments in support of international law. Give one example justifying the importance of international law. Cite sources.?
-
Ivanhoe Corporation incurred the following transactions. 1. Purchased raw materials on account $50,060. 2. Raw Materials of $38,880 were requisitioned to the factory. An analysis of the materials...
-
On March 1 of the current year, Spicer Corporation compiled Information to prepare a cash budget for March, April, and May. All of the company's sales are made on account. The following Information...
-
Overview Music can be such a great way to reflect upon your life and think about your identity journey. Think about what music you were listening to in middle school and how that aligned with your...
-
1) Before getting into BOP analysis, you need to provide a brief economical description of the assigned country. In your description, you may discuss points such as the components of GDP, growth...
-
Nakashima Gallery had the following petty cash transactions in February of the current year. Nakashima uses the perpetual system to account for merchandise inventory. February 2 Wrote a $340 check to...
-
A project that generated $2,650 annual cash flow for eight years would cost $12,200 today. If the required return is 13.5 percent, is this a good project?
-
From 1970 to 1990, Sri Lanka's population grew by approximately 2.2 million persons every five years. The population in 1970 was 12.2 million people.What is the best formula for P, Sri Lanka's...
-
You have decided to start planning for your retirement by analyzing different retirement plans. The plan offered by IRA Managers requires you to deposit $5,000 at the beginning of each of the next 30...
-
1. Calculate the after-tax cost of each component source of capital. 2. Calculate the marginal cost of capital for the various intervals, or packages, of capital the company can raise next year. Plot...
-
Illustrate how the statement of cash flows can be used as a financial planning technique.
-
Using the results of Problem 2.6, determine the invariants \(U_{i}\) and \(V_{i}\) for the AS/3501 lamina, where \(i=1,2,3,4\). Problem 2.6 Find all components of the stiffness and compliance...
-
Show how the Mohr's circles in Figure 2.17 can be used to interpret the transformed lamina stiffness \(\bar{Q}_{12}\). FIGURE 2.17 40 'n Q11 In- n> Q11 20 -U-
-
Using the results of Problem 2.6 or Problem 2.16, compare the transformed lamina stiffnesses for AS/3501 carbon/epoxy plies oriented at \(+45^{\circ}\) and \(-45^{\circ}\). Problem 2.6 Using the...
Study smarter with the SolutionInn App